Will the government undo its damaging company car tax policies in 2019?

Posted By: TMC - 21st January 2019

Welcome to a ‘baffling’ and ‘bonkers’ 2019.

I wish I were being flippant, but I’m not. Those are words recently applied by the SMMT and ACFO, respectively, to the government’s peremptory changes to plug-in grants last October.

They illustrate the industry’s mounting frustration at the damaging disparity between the government’s badly thought-out changes to fleet/motoring taxes and its goals for green mobility and a healthy automotive sector.

As I wrote last year, (All taxed-up and nowhere to go. What HMRC’s report says about the future of company cars.), we no longer have a fairly-weighted BIK system designed to encourage progressively lower emissions.

WLTP clearly caught the Treasury on the hop when it had already committed to doubling the rate of annual increases in company car tax and raising the diesel surcharge. Taken together, the changes created a BIK ‘cliff’ between conventional ICEs and ultra-low emission vehicles, notably PHEVs.

The policy famously led many company drivers to choose PHEVs solely for tax reasons – some of them did not even bother to unseal their car’s charging cable.

The government responded by bringing forward planned cuts to retail subsidies for EVs and PHEVs, a move Mitsubishi condemned as “completely at odds with the government’s stated objective of making the UK a world leader in green mobility.”

Throw incessant press attacks on diesel into the mix and you have a recipe for inflicting the kind of damage on the UK car market that we saw in 2017 and 2018, with sales suffering their worst slump since the financial crash and average CO2s on the rise again after 20 years of progress.

A chance to get it right

To give the government its due, it is currently asking businesses for ideas on how to change car BIK and VED (again) to mitigate the impact of WLTP emissions results.

The Treasury put out a consultation paper on 19 December, which you can download from the link below if you wish. The consultation closes on Sunday, February 17, 2019, with an official response due in the spring.

I won’t summarise all the questions here: suffice to say the government only wants to make a “simple” adjustment, such as a change in rates.

My simple suggestion is for the government to do what it promised to do in 2016 – completely scrap the diesel surcharge.
For reasons I will explain in my next post, lifting the surcharge on Euro 6 cars would not only rebalance BIK after WLTP.

It would actually do more to help the environment and air quality than the highly oversimplified anti-diesel campaign the government has been tacitly conducting via the popular media.

And needless to say, it will help car sales as well as saving money for fleet operators and business drivers.

In the meantime, here is the link to download the BIK consultation.